Salmon price: a key factor in the coming months

Christian Pérez If the supply pressure persists for too long, the high cost of salmon may result in a loss of some of the valuable ground gained last year in terms of market penetration. Chile can take advantage of the price situation, however, in order to gain a foothold in traditionally Norwegian markets, while wild salmon producers are now in a good position to expand supply to farmed-dominated markets. Meanwhile, feed prices will continue to put pressure on margins. According to the latest report on salmon prepared by FAO GlobeFish, Norwegian salmon producers in particular have benefitted enormously from impressive export price performance on EU markets, where the foreseeable future looks positive. Chilean farmers have not fared quite so well, and many are facing losses for the first quarter of 2013 as the improved market situation in the USA failed to compensate for weaker prices and unfavourable trade conditions in Japan. The persistent threat of disease in Chile and much higher feed costs this year present additional challenges for producers, while widespread industry consolidation continues. The strong upward price trend that began in late 2012 continued unabated throughout the first five months of 2013, defying industry expectations and approaching record levels on EU markets in late May. For Chilean producers, low frozen Coho prices in the first few months were beginning to pick up in Japan in May, and the positive trend continues in the USA.  The delayed consumer response to more expensive raw material prices, together with a rise in harvest volumes, is predicted to see prices fall back again somewhat in many markets in the second half of the year. However, with the present market balance, analysts are not predicting a major decline, and most put average 2013 NOK/kg export prices in the mid-30s. Demand in most markets has shown considerable resilience in the face of rapidly rising prices, with the EU and the US posting increased year-on-year volumes in the first quarter. France, Germany and the UK in particular are performing well, as are key emerging markets such as Brazil and China. This is at least partly due to the similarly high prices of meat, forecast to persist in the medium term, which mean limited availability of cheaper basket alternatives for the consumer. However, the full impact of the high raw material prices that processors are paying is only just beginning to be felt at the consumer end, and demand is likely to suffer. Nevertheless, this could also be an important opportunity for Chilean producers, who are now trying to use the relatively more attractive prices of frozen, valued-added product to increase their market share in the EU.